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28 / Nov / 2012 Elevators, Garment Hangers and the 72712 Zip Code

If you read our first post about logistics management you might know the reason Retailer X has detergent, milk and two candy bars when and where you need them. Thanks to the work of Culverhouse professors Glenn Richey, Ph.D. and Alex Ellinger, Ph.D., we now know that logistics management is to be credited for having those products in the right place, at the right time, at some sort of reasonable price.

So maybe you still don’t care about the science that is also called supply chain management. Richey, interim associate dean of international business, and Ellinger, professor of business administration and co-director of Supply Chain Institute, are okay with that. After all, maybe you don’t buy that much milk, detergent or candy bars.

But what if you are late for your meeting because an elevator is being serviced?

Elevator repair is another example of how this business science is changing the way we live and work -- even when what is being sold is a service, rather than a product. Let’s say your job is to schedule maintenance on a big building, and the elevators need servicing. You solicit bids. One stands out -- a company that not only guarantees its work, but also guarantees that the servicing will be done at night, while no one is working.

Guess who gets the bid? That’s right. It’s the company that differentiated itself by catering to its customers’ needs. If you’re the maintenance scheduler, the service provider makes you look smart. If you’re the end-user, you’re on time to your meeting.

Duck Dynasty’s Phil might say everybody is happy, happy, happy.

As researchers and co-editors of the International Journal of Physical Distribution and Logistics Management, Richey and Ellinger cite dozens of current examples of how this science of supply and demand is working in today’s international markets, and how it affects both workers andconsumers. They share those examples with their Culverhouse students. What they’re teaching those students is so likely to have an impact on the way U.S. businesses operate that the College is now listed in the world’s top ten supply chain research institutions.

Sometimes logistics have to do with both services and product. Let’s say you own a clothing store. One supplier ships their shirts on hangers, already priced. That means you get inventory on the floor a full day earlier, without paying your workers overtime for after-hours pricing,hanging, and steaming. Since you don’t pass overtime charges to your customers, you can sell those shirts at an immediate discount. It’s just another example, Ellinger says, of the supplier anticipating and responding to customer/consumer needs.

Anticipating and responding is the reason about 200 companies maintain offices in Bentonville, Arkansas, 72712, where Wal Mart oversees product lines carrying their super-slim, three percent profit margin. A supplier who can feed Wal Mart’s appetite for perfectly-timed, perfectly-priced inventory earns its place in its mega market. In an age where price trumps branding, those 200 suppliers know the advantages of proximity – thus the 72712 locations.

The same can be said of other industries. Automotive plants bring jobs directly and indirectly, drawing suppliers (or “shadow organizations”) to small towns surrounding places like Vance, Alabama. Mercedes and other manufacturers outsource inventories and some pre-assembly to those suppliers, so it can focus on what it does best – vehicle assembly.

“Outsourcing is tightly involved in the process,” says Richey. “Essentially, outsourcing has become a strategy of its own.”

That brings us to Why You Should Care, III: Outsourcing, pine plantations, and Nike – how you might be affected by “core competence” companies.